ROSS v. Fed. DEPOSIT Ins. Corp.

• Decision Date: 29 October 2010
• Docket Number: No. 08-1851.,08-1851.
• Citation: 625 F.3d 808
• Parties: Charlene ROSS, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Washington Mutual Bank, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

625 F.3d 808

Charlene ROSS, Plaintiff-Appellant,

v.FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Washington Mutual Bank, Defendant-Appellee.

No. 08-1851.

United States Court of Appeals,Fourth Circuit.

Argued: Sept. 22, 2010.

Decided: Oct. 29, 2010.

COPYRIGHT MATERIAL OMITTED.

Christopher Wyatt Livingston, White Oak, North Carolina, for Appellant. Thomas G. Hooper, Nelson Mullins Riley & Scarborough, LLP, Charlotte, North Carolina, for Appellee.

Before WILKINSON, KING, and GREGORY, Circuit Judges.

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Judge KING and Judge GREGORY joined.

OPINION

WILKINSON, Circuit Judge:

Charlene Ross brought claims against Washington Mutual Bank (“WaMu”) for false reporting of credit information and unfair debt collection practices. But she tarried too long, and by filing outside of the Fair Credit Reporting Act's (“FCRA”) two-year statute of limitations she lost any FCRA claims she may have had, whatever their merit.

Ross has tried to skirt this deficiency by bringing several state law claims. Those claims, in the main, are preempted by 15 U.S.C. § 1681t(b)(1)(F), the FCRA's preemption provision. And though Ross contends her claims are expressly authorized by another FCRA provision, 15 U.S.C. § 1681h(e), she fails to present evidence that WaMu acted with the “malice or willful intent to injure” necessary to benefit from this section. Ruling otherwise would require us to broaden the definition of “malice” to include mere negligence, and such a holding would vitiate both the FCRA's statute of limitations and its preemption provision.

Only Ross's unfair debt collection practices claim survives preemption, but it too fails because she cannot prove proximate causation, an element of her state law claim. The district court awarded WaMu summary judgment on both of these claims, and we now affirm.

I.

James Williams executed a mortgage on a home on May 8, 1996. This loan was eventually assigned to WaMu, and WaMu held it for all periods relevant to this case. The FDIC is involved in this case as the receiver of Washington Mutual Bank. On or about August 16, 1996, Williams quitclaimed his interest in the property to Charlene Ross, and the two married the following month. The relationship soured, and in April 2001 Ross secured a domestic violence protective order evicting Williams. Ross obtained another order the following month naming her as the property's owner. Williams, however, retained sole responsibility for the loan.

Ross contacted WaMu about this arrangement in July 2001. At that time, Ross confirmed that any payments she made would be properly credited to the mortgage, requested an IRS 1098 form to claim a tax deduction for mortgage interest, and asked that she receive monthly mortgage statements at the address of the encumbered home. Ross then sent WaMu the necessary documentation, including her social security card, the May 2001 order, and the August 1996 quitclaim deed. In the process of fulfilling Ross's requests, WaMu mistakenly listed Ross's name on the mortgage.

The loan went into default when no payments were made from June 2001 through September 2001. On September 11, 2001, Ross discovered that WaMu had reported negative information about her to consumer reporting agencies (“CRAs”). WaMu took this action based on its mistaken belief that Ross was responsible for the loan. Ross contacted WaMu, but WaMu informed her that it did not know why the name on the loan was changed. She also contacted the CRAs directly, but they could only confirm that WaMu had indeed placed the negative trade line on her report.

WaMu began pursuing foreclosure proceedings in October 2001, but in February 2002 Ross made the payments necessary to reinstate the mortgage. Later in 2002, Ross contacted WaMu about the loan appearing on her credit reports. WaMu conducted an investigation, suspended credit reporting for the loan, and notified Ross of these actions in a September 27, 2002 letter.

But in June 2003 the loan again went into default. In August 2003, Ross notified WaMu that one of the CRAs was still reporting the loan on her credit report. WaMu conducted another investigation, acknowledged that Ross was not responsible for the loan, and directed the CRAs to remove the loan from Ross's credit report. The loan has not been on Ross's credit reports since December 31, 2003, but as a result of the negative trade line, she alleges she was denied credit on multiple occasions, including a business loan that Ross claims would have allowed her to open an assisted-living facility that would have made $3,000,000 in annual profits.

Other events occurring in Ross's life during this time period are relevant to her claims. Between 2001 and 2003, Ross experienced numerous difficulties while employed as a high school teacher in the Charlotte-Mecklenburg school system. During this time, she pursued two employment discrimination charges and claims to have developed carpal tunnel syndrome and Post Traumatic Stress Disorder (“PTSD”). This is also when WaMu, acting on its mistaken belief that Ross was responsible for the loan, placed debt collection calls to Ross's work.

WaMu again began pursuing foreclosure proceedings in February 2004. On May 21, 2004, Ross filed suit in North Carolina state court seeking to enjoin the foreclosure. She also alleged North Carolina Unfair and Deceptive Trade Practices Act (“NCUDTPA”) claims against WaMu. The court denied her motion for a preliminary injunction, and the trustee sold the home. On August 25, 2005, Ross dismissed her lawsuit against WaMu without prejudice.

Then on August 22, 2006, Ross again filed a complaint against WaMu in North Carolina state court. Ross alleged common law defamation claims, violations of the FCRA, and violations of the NCUDTPA. Ross sought actual, statutory, and punitive damages for her wrongfully damaged credit scores, emotional distress, poor health, lost income, and lost business opportunities. WaMu removed the action to federal court on November 8, 2006. WaMu then moved for summary judgment, which the district court granted on July 2, 2008. Ross v. Washington Mutual Bank, 566 F.Supp.2d 468, 485 (E.D.N.C.2008). Ross now appeals the grant of summary judgment on her NCUDTPA claims.

II.

The NCUDTPA regulates trade practices. N.C. Gen.Stat. § 75-1.1. Included within this statutory scheme are several consumer protection provisions. Id. §§ 75-1.1, 75-50 to 75-56. Article 1 of the NCUDTPA contains a general ban on “unfair or deceptive acts or practices in or affecting commerce.” Id. § 75-1.1(a). Article 2 of the NCUDTPA is the North Carolina Debt Collection Act (“NCDCA”), which prohibits various unfair debt collection practices. Id. §§ 75-50 to 75-56. We will first evaluate Ross's claims under Article 1 of the NCUDTPA before turning to her NCDCA claims under Article 2.

A.

[1] Ross claims that WaMu's reporting of incorrect information to CRAs violates the NCUDTPA, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” N.C. Gen.Stat. § 75-1.1(a). But the FCRA's preemption provision, 15 U.S.C. § 1681t(b)(1)(F), preempts this claim, regardless of its underlying merits.

The FCRA is a comprehensive statutory scheme designed to regulate the consumer reporting industry. 15 U.S.C. § 1681(a). Congress recognized both the “vital role” of CRAs and the “need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy.” Id. CRAs provide a critical economic service by collecting and transmitting consumer credit information. See Cushman v. Trans Union Corp., 115 F.3d 220, 223 (3d Cir.1997). But CRAs can make mistakes by reporting inaccurate credit information. See id. These errors are detrimental to the consumer, the creditor, and the economy as a whole. See id.

Accordingly, Congress determined that while CRAs must be allowed to perform their function, a regulatory framework was necessary to prevent errors in credit reporting and remedy those that do occur. In 1970, Congress accommodated both of these interests by enacting the FCRA, a “comprehensive series of restrictions on the disclosure and use of credit information assembled by consumer reporting agencies.” FTC v. Manager, Retail Credit Co., 515 F.2d 988, 989 (D.C.Cir.1975). The FCRA “has been drawn with extreme care, reflecting the tug of the competing interests,” and courts must respect the balance struck by Congress when interpreting its provisions. Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir.2002).

[2] As originally enacted, the FCRA generally permitted state regulation of the consumer reporting industry. With but few exceptions, the original preemption provision, 15 U.S.C. § 1681t(a), preempted state laws only “to the extent that those laws are inconsistent with any provision of [the FCRA].” As part of the ongoing process of fine-tuning this statutory scheme, Congress amended the FCRA with the Consumer Credit Reporting Reform Act of 1996 (“CCRRA”). Pub. L. No. 104-208, 110 Stat. 3009, 3009-426 to -455. The CCRRA added a strong preemption provision, 15 U.S.C. § 1681t(b), to this comprehensive legislative framework. The purpose of this new subsection was, in part, to avoid a “patchwork system of conflicting regulations.” Michael Epshteyn, Note, The Fair and Accurate Credit Transactions Act of 2003: Will Preemption of State Credit Reporting Laws Harm Consumers?, 93 Geo. L.J. 1143, 1154 (2005).

Included within the new subsection added by the CCRRA is 15 U.S.C. § 1681t(b)(1)(F), the preemption provision at issue in this case. It states:

No requirement or prohibition may be imposed under the laws of any State (1) with respect to any subject matter regulated under ... (F) section 1681s-2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting...